Central government is poised to introduce significant reforms in the insurance sector, including allowing 100% foreign direct investment (FDI) and easing restrictions on insurance agents, according to a report in The Times of India. These changes are part of the proposed Insurance Amendment Bill, which is expected to be presented during the winter session of Parliament later this month, said the report on November 18.
Currently, the FDI cap for insurance companies is set at 74%. However, the new bill proposes to lift this ceiling entirely, allowing foreign players to enter the market and operate independently. This move is expected to attract large global insurance firms, boosting competition and investment in the sector.
Additionally, the bill will enable insurance agents to sell policies from multiple companies, removing the existing cap that restricts them to one life and one general insurer. While agents have often found ways around this rule—by using family members to register as agents for different firms—the proposed changes would officially allow agents to act as intermediaries for a range of products across the life and general insurance sectors, said the report.
These reforms are part of the government's strategy to increase insurance penetration in India, which remains low at around 4%. The policy aims to bring in more insurers to underwrite policies and give agents the flexibility to offer a broader range of products to consumers.
Currently, India has 24 life insurance companies, 26 general insurers, and 6 standalone health insurance firms, with the General Insurance Corporation (GIC) acting as the sole reinsurer. The proposed reforms come at a time when some foreign players, such as Allianz, are looking to exit their partnerships with Indian companies like Bajaj Finserv and enter the market independently.
The government’s assessment indicates that large domestic players such as SBI, ICICI, HDFC Bank, the Tatas, and the Birlas are already well-established in the market. However, with life insurance being a capital-intensive, long-term business, there may be limited domestic companies with the financial strength to compete at scale, the report added.
Along with raising the FDI ceiling, the Insurance Amendment Bill is also expected to ease certain regulatory requirements, including those related to company directors. In addition, the Insurance Regulatory and Development Authority of India (IRDAI) has proposed changes to allow companies to hold composite licenses. This would benefit firms like Life Insurance Corporation of India (LIC), which is keen to expand its product offerings by acquiring a health insurance company.
The government is also looking to relax solvency requirements, freeing up capital for insurers to enhance their operations and offerings.
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